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The paper deals with compensation of frequently time-variable loads by means of STATCOM controllers. An arc furnace is considered as a heavily distributing load. The STATCOM system was used to ensure good power quality at the point of common coupling. For analysis of the system performance, the PSCAD/EMTDC programme was applied. Simulation models of the load and two types of STATCOM controllers, 12-pulse and 24-pulse, are discussed in the paper. A PSCAD model of a measurement block is also proposed for power quality assessment. Some results of simulation are presented, which show the compensation effectiveness.